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`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
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`:
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`: Civil Action No. 06-4929 (GEB) (ES)
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`::
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`::
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`NOT FOR PUBLICATION
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`COLLEZIONE EUROPA U.S.A., INC.
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` Plaintiff/Counterclaim Defendant,
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`
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`
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`v.
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`AMINI INNOVATION CORP.
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`: OPINION AND ORDER
`:
`:
`Defendant/Counterclaimant.
`____________________________________:
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` August 26, 2009
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`SALAS, UNITED STATES MAGISTRATE JUDGE:
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`I. INTRODUCTION
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`Plaintiff Collezione Europa U.S.A., Inc. (“Collezione”) and Defendant Amini Innovation
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`Corp. (“AICO”) are no strangers to each other in litigation. The instant action, spawned by
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`another, was brought by Collezione against AICO in this Court seeking, among other things, a
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`declaratory judgment that it has not infringed on patents or copyrights owned by AICO. In turn,
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`AICO counterclaimed against Collezione asserting, among other things, copyright and patent
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`infringement. AICO’s counterclaims are the subject of this motion, as it now seeks to amend its
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`answer to include new counterclaims by adding two new claims of copyright infringement and in
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`addition, by joining two individuals as defendants.
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`For the reasons set forth below, AICO’s motion will be granted in part, and denied in
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`part. To summarize this Court’s holding, AICO’s motion to add two new claims of copyright
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`infringement is denied. Its proposed amendment to add Leonard Frankel and Paul Frankel as
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`Counterclaim Defendants is granted.
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`1
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`II. BACKGROUND
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`A.
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`Ancillary Actions and the Instant Action
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`Both parties are furniture manufacturers. This action was filed by Collezione on October
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`13, 2006. It is the outgrowth of another action filed by AICO against Bel Furniture, a retailer of
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`Collezione products, in the U.S. District Court for the Southern District of Texas on May 5,
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`2006. AICO alleged that Bel Furniture was selling infringing Collezione products, specifically
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`the 6500 furniture collection, that AICO alleged infringed on its Francaise furniture collection.
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`AICO sought injunctive and monetary relief in that action against Bel Furniture. Collezione was
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`not originally named in Texas action.
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`In the meantime, Collezione brought the instant action against AICO and subsequently,
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`AICO named Collezione as a defendant in the Texas action. By then, however, AICO had settled
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`its claims with Bel Furniture, so the balance of the Texas Court action against Collezione was
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`transferred to this Court. Choosing to litigate elsewhere, AICO brought a new action against
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`Collezione and three of its retailers in California. In October 2007, the California court stayed
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`that action in favor of the litigation here.
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`On November 5, 2007, AICO filed its Answer and Counterclaim against Collezione (and
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`later amended it on December 21, 2007). The instant motion to assert a Second Amended
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`Counterclaim was filed on December 30, 2008.
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`B.
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`Collezione’s Bankruptcy
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`Discovery has never commenced in this case due to the extensive motion practice before
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`2
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`this Court and to Collezione’s bankruptcy. Specifically, Collezione filed for bankruptcy under
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`Chapter 11 of the Bankruptcy Code on or about February 29, 2008, subjecting the instant action
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`to the automatic stay provision of the Bankruptcy Code. On March 27, 2008, AICO filed in the
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`bankruptcy case a proof of claim seeking $2,000,000 arising out of the instant litigation.
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`Importantly, AICO filed its proof of claim before the bar date of July 1, 2008. On May 6, 2008,
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`the Bankruptcy Court of the District of New Jersey granted AICO relief from the automatic stay
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`provision so that it could assert its rights in this action. On November 18, 2008, Collezione filed
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`its plan of reorganization with the Bankruptcy Court. Collezione’s plan was approved by the
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`Bankruptcy Court on March 13, 2009.
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`C.
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`The Interplay Between the Bankruptcy Proceeding and the New Counterclaims
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`AICO seeks to add two counterclaims asserting two new copyright infringement claims
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`(“the New Copyrights”). First, AICO alleges that Collezione has infringed on copyright VA-
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`623-887 which was registered on November 27, 2007, designated as a Cortina Armoire. Second,
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`AICO avers that Collezione has infringed on copyright VA-623-886 which was registered on
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`November 27, 2007, designated as a Cortina Night Stand.
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`Importantly, these copyrights were registered before Colliezone’s bankruptcy petition was
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`filed. They did not serve as a basis for AICO’s copyright infringement claims in either its
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`Counterclaim or its First Amended Counterclaim. The New Copyrights are, indeed, the
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`gravamen of the Proposed Second Amended Counterclaim AICO seeks to file in this Court.
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`Thus, when AICO filed its proof of claim in the Bankruptcy Court arising out of this litigation, it
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`1
`Pending before the District Court are AICO’s motion to transfer this case to the Central District of
`California [Dkt. 21], Collezione’s motion for a more definite statement [Dkt. 24], and Collezione’s motion to dismiss
`a number of AICO’s Third, Fourth, Fifth, and Six Counterclaims [Dkt. 38].
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`3
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`was only doing so based on the claims it had in this Court at that time. Accordingly, the New
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`Copyrights asserted in this case are tantamount to an amendment of AICO’s original proof of
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`claim.
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`D.
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`Even More Litigation and the Frankels
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`In 2004, Universal Furniture International, Inc. (“UFI”) brought suit against Collezione in
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`U.S. District Court for the Middle District of North Carolina. In that proceeding, Leonard and
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`Paul Frankel, the principals of Collezione, were deposed in 2006. The parties dwell on the
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`nature of their deposition testimony, but this is largely irrelevant to the amendment analysis as set
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`forth below. Suffice it is to say that AICO alleges that the Frankels are personally responsible for
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`the alleged infringement and should be subject to personal liability in this litigation. By way of
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`amendment, they seek to bring them in this case.
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`III. DISCUSSION
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`A.
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`The New Copyrights
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`Because what AICO seeks to do in practical terms is to amend its proof of claim,
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`bankruptcy law governs. “The Bankruptcy Rules contain no provision governing amendment of
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`a proof of claim.” Northeast Office and Commercial Properties, Inc. v. Smith Valve Corp. (In re
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`Northeast Office & Commercial Properties, Inc.), 178 B.R. 915, 921 (Bankr. D. Mass 1995). As
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`Collezione is formally objecting to AICO’s amendment, it would be treated as an adversary
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`proceeding in Bankruptcy Court. See Fed R. Bankr. P. 3007. Thus, as the Northeast Office court
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`held, because it would be treated as such a proceeding, Fed. R. Civ. P. 15 applies. See also In re
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`Enron Corp., 328 B.R. 75, 87 (Bankr. S.D.N.Y. 2005) (analyzing post-bar date amendments
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`under Fed. R. Civ. P. 15). As the bar date has come and gone, infringements of the New
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`4
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`Copyrights can only be asserted if they relate back to the original claims made in AICO’s proof
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`of claim. Rule 15 states, in pertinent part:
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`An amendment to a pleading relates back to the date of the
`original pleading when:
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`(A) the law that provides the applicable statute of limitations
`allows relation back;
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`(B) the amendment asserts a claim or defense that arose out
`of the conduct, transaction, or occurrence set out--or
`attempted to be set out--in the original pleading . . .
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`Subsection A does not apply, as there is no applicable statute of limitations (the bar date
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`fixes the date certain). Northeast Office, 178 B.R. at 922. Thus, the Court must decide whether
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`the amendment asserts a new claim that “arose out of the conduct, transaction, or occurrence set
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`out . . . in the original pleading.” Fed R. Civ. P. 15(c)(B). For the reasons set forth below, the
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`Court concludes that it does not.
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`For a newly added claim to relate back, “the basic claim must have arisen out of the
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`conduct set forth in the original pleading.” Slayton v. American Exp. Co., 460 F.3d 215, 228 (2d
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`Cir. 2006) (internal quotation marks omitted). There is a dearth of caselaw on whether or not
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`separate and distinct copyright infringements, of different products, arise out of the same
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`transaction or occurrence. The Court finds that using patent law as an analog is appropriate in this
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`case, as both types of claims involve potentially infringing products that enter the stream of
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`commerce. Cf. ESP Shibuya Ent., Inc. v. Fortune Fashion Industries, No. 08-3992, 2009 WL
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`1392594, at *3 (D.N.J. May 15, 2009) (“[p]atent infringement is a useful analog to trademark
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`infringement because both types of cases revolve around products entering the stream of
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`commerce and complaints, leading to litigation, arising thereto”).
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`5
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`“The Federal Circuit has not yet determined whether or under what circumstances the
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`‘relation back’ doctrine applies to patent infringement claims where the amendment adds claims
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`involving different patents.” Mann Design Ltd. v. Bounce, Inc., 138 F. Supp. 2d 1174, 1178 (D.
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`Minn. 2001). Since the Mann decision was decided in 2001, the Federal Circuit has yet to address
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`the question. See Halo Electronics v. Bel Fuse, Inc., No. 07-6222, 2008 WL 1991094, at *2 (N.D.
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`Cal. May 5, 2008). A number of district courts have provided guidance, however, and a
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`consensus has emerged: a new claim of infringement involving another patent only “is the same
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`‘conduct or occurrence’ . . . only where the second patent was part and parcel of the controversy
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`surrounding the earlier patent.” Mann, 138 F. Supp. 2d at 1178 (quoting Hooker Chems. &
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`Plastics Corp. v. Diamond Shamrock Corp., 87 F.R.D. 398, 403 (W.D.N.Y. 1980)). The Court
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`agrees that the “part and parcel” analysis obtains in the copyright context, as well, because new
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`copyrights could, in some instances, be natural outgrowths of old copyrights (e.g., a new lyrical
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`arrangement or other update to a copyrighted song) and thus arise out of the same occurrence or
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`transaction.
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`This begs the question, are these new assertions of infringement “part and parcel” of the
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`earlier allegations of infringement involving different products? To be sure, the New Copyrights,
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`which register Cortina brand products, are of the same Cortina brand that AICO originally named
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`in its First Amended Counterclaim [Dkt. 42 at pg. 28]. While it is a close question, the Court
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`cannot state with confidence that the New Copyrights are part and parcel of the controversy
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`surrounding the earlier allegations of infringement. The New Copyrights concern two completely
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`different products. In this regard, the Mann court’s discussion of “part and parcel” is instructive.
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`Mann was a declaratory judgment action seeking to declare three of Defendant Bounce's
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`6
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`patents involving pet toys invalid. Pending at the same time was an ancillary and related patent
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`infringement action brought by defendant Bounce in the District of Colorado for patent
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`infringement. Id. at 1176. The primary patent at issue was the ‘061 patent held by Bounce. In
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`the Mann action, Bounce filed a statement of non-liability regarding the ‘061 patent, asserting that
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`Mann was neither liable for any past, present, or future infringement of the ‘061 patent. Id. Two
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`other patents held by Bounce however – the ‘559 and ‘053 patents – were still the subject of the
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`action in Colorado, as well as the subject of Mann in Minnesota. The Court had to determine, in
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`light of the non-infringement declaration regarding the ‘061 patent, whether or not the ‘559 and
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`‘053 could stay in the case depending whether they arose out of the same transaction or
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`occurrence of the ‘061 patent. Id. at 1178-79. The Court considered whether these patents were
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`“part and parcel” of the ‘061 patent. Id. at 1178. The Court held that they were not. Id. at 1178-
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`80.
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`Although the Court held that the ‘053 was a “continuation” of the ‘061 patent, it could not
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`be considered “part and parcel” of the ‘061 patent because Mann failed to offer any evidence that
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`it “involve[d] a common core of operative facts, or whether the same underlying evidence offered
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`in support of the original claim will prove the new claim.” Id. at 1179.
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`So too, here. AICO has offered no evidence to this Court – indeed far short of anything
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`that would demonstrate that the New Copyrights were “continuations’ of old copyrights – that the
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`New Copyrights, comprised of completely separate products involve a common core of operative
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`facts. There are completely different copyrights of completely different products. AICO has thus
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`failed to make a showing that the New Copyrights are part and parcel of the original claims
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`asserted. Because they are out of time with the assertion of the New Copyrights, they have to
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`relate back – arise out of the same transaction or occurrence – to the original claims. They simply
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`do not.
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`The Court also considers the implications of a contrary holding: if the Court were to allow
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`amendments that are out of time to relate back that involve entirely different copyrights for
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`entirely different products, a party could readily evade a statute of limitations by bootstrapping
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`stale copyright claims onto ones that are fresh, thus allowing the exception to swallow the rule.
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`Such a holding would render the statute of limitations a nullity in copyright cases. 2
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`This is especially so in a case where allowing the amendment would have the practical
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`effect, as stated above, of allowing a post-bar date amendment to a bankruptcy claim. Such
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`amendments are not taken lightly by courts. Evaluating the factors that courts employ when
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`analyzing the claim strongly supports this Court’s conclusion that the amendment is not
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`appropriate here. Amendments are allowed, generally, “where the purpose is to cure a defect in
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`the claim as originally filed, to describe the [original] claim with greater particularity or to plead a
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`new theory of recovery on the facts set forth in the original claim.” In re Enron Corp., 328 B.R.
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`at 86. None of the three factors are applicable in the instant litigation. The addition of the New
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`Copyrights does not serve to cure a defect, does not seek to describe a previous claim with more
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`particularity, nor does it plead a new theory of recovery based on facts already set forth in the
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`original claim.
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`Simply stated, the proposed amendments assert entirely new claims of infringement
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`involving two separate copyrights. The Supreme Court has long since held that “[e]ach copyright
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`2
`Moreover, another court has taken an even sharper view, holding that the alleged infringement of one
`patent surely does not arise out of the same transaction or occurrence as the infringement of an entirely different one.
`Illinois Tool Works v. Foster Grant Co., Inc., 395 F. Supp. 234, 250-51 (N.D. Ill. 1974).
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`is treated as a distinct entity, and the infringement of it as a distinct wrong to be redressed through
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`the enforcement of this liability . . . the plain import of the statute is that this liability attaches in
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`respect of each copyright that is infringed.” Westermann Co. v. Dispatch Printing Co., 249 U.S.
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`100, 105 (1919) (emphases added). The distinctiveness of the copyrights at issue here leads this
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`Court to the conclusion that the New Copyrights cannot relate back to the original counterclaims
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`pleaded in this case. Accordingly, the motion to amend on this point is denied.
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`B.
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`The Frankels
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`Collezione mounts both an undue delay argument to bringing Leonard Frankel and Paul
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`Frankel into the case, as well as a futility argument but only as against Paul Frankel. Each will be
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`discussed in turn.
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`i.
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`Undue Delay
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`Fed. R. Civ. P. 15(a) allows a party to amend its pleading by leave of court when justice so
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`requires. Leave to amend pleadings is to be freely given. Fed. R. Civ. P. 15(a)(2); see also Foman
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`v. Davis, 371 U.S. 178, 182 (1962). The decision to grant leave to amend rests within the
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`discretion of the court. Foman, 371 U.S. at 182. Pursuant to Foman, leave to amend may be
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`denied on the basis of: (1) undue delay; (2) bad faith or dilatory motive; (3) undue prejudice to the
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`opposing party; and (4) futility of amendment. Id. “Only when these factors suggest that
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`amendment would be ‘unjust’ should the court deny leave.” Arthur v. Maersk, Inc., 434 F.3d 196,
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`203 (3d Cir.2006) (internal citations omitted).
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`Delay alone does not justify denying a motion to amend. Cureton v. Nat'l Collegiate
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`Athletic Ass’n, 252 F.3d 267, 273 (3d Cir.2001). Rather, only when the delay places an
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`unwarranted burden on the court or on the opposing party is a denial on the basis of delay
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`appropriate. Adams v. Gould, Inc., 739 F.2d 858, 868 (3d Cir.1984). Moreover, unless the delay at
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`issue will prejudice the non-moving party, a movant does not need to establish a compelling
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`reasons for its delay. Heyl & Patterson Int'l, Inc. v. F.D. Rich Housing of Virgin Islands, Inc., 663
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`F.2d 419, 426 (3d Cir.1981).
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`There was no undue delay here, and even assuming there was, there is no prejudice to
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`Collezione. This case, despite being filed three years ago, is in its infancy. There has been no
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`scheduling conference. No depositions have been taken. Indeed, this is due to the extensive
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`motion practice that has taken place in this Court. In like instances, courts in this district routinely
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`grant motions to amend where a case is in its early stages. See, e.g., Celgene Corp. v. Teva
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`Pharm. USA, Inc., 07-4459, 2008 WL 5100576 (D.N.J. Nov. 26, 2008) (granting a motion to
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`amend where discovery was in its infancy and no depositions had yet taken place); B.A.T. Wear,
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`Inc. v. Resourcing America, Inc., No. 04-2612, 2006 WL 3193757, at *2 (D.N.J. Nov. 1, 2006)
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`(granting a motion to amend where the action was “still in its preliminary stage” and discovery
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`had not yet taken place). The same analysis obtains here. Collezione’s undue delay argument
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`fails.
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`ii.
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`Futility
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`“‘Futility’ means that the complaint, as amended, would fail to state a claim upon which
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`relief could be granted.’” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d
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`Cir.1997) (quoting Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st Cir. 1996)). To
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`determine whether a proposed amendment is futile the Court applies the same standard as a
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`motion to dismiss under Rule 12(b)(6). Medpointe Healthcare, Inc. v. Hi-Tech Pharmacal Co.,
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`Inc., 380 F. Supp. 2d 457, 462 (D.N.J. 2005). The Court therefore most accept all factual
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`allegations as true “as well as the reasonable inferences that can be drawn from them.” Brown v.
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`Phillip Morris, Inc., 250 F.3d 789, 796 (3d Cir. 2001).
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`Collezione argues that bringing Paul Frankel into the case would be futile because there is
`3
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`no way he could be on the hook for copyright infringement. (Pl.’s Opp’n Br. 17.) It cites
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`deposition testimony where Frankel states that he was on the business end of things rather than the
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`design/development end. (Pl.’s Opp’n Br. 18.) On the other hand, AICO argues that it does, in
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`fact, state a valid claim against Paul Frankel and cites other deposition testimony stating that he
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`was an integral part of the business and had a hand in some design. (Deft.’s Br. 11.)
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`With these competing declarations by the parties, accepting AICO’s allegations as true,
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`and drawing all reasonable inferences from them, the Court cannot say that adding Paul Frankel as
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`a defendant would be futile at this juncture. As co-principal of Collezione, one can reasonably
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`make the inference that he may be liable for the alleged infringement. Those other than direct
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`infringers can be held liable under the Copyright Act. See EMI April Music, Inc. v. White, 618 F.
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`Supp. 2d 497, 506 (E.D. Va. 2009) (“[t]here seems to be no dispute among courts that a person
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`can, in certain circumstances, be found to have infringed a copyright based on the acts of
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`another”). Indeed, such secondary liability can exist when a defendant “possess[es] the right and
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`ability to supervise the infringing conduct [and] . . . ha[s] “‘an obvious and direct financial interest
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`in the exploitation of copyrighted material.’” Id. at 507 (quoting Shapiro, Bernstein & Co. v. H.L.
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`Green Co., 316 F.2d 304, 307 (2d Cir.1963)).
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`Plaintiff has thus stated a claim against Paul Frankel. The motion to amend is therefore
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`3
`Collezione does not argue futility as to Leonard Frankel. Because the undue delay argument fails (as to
`both), the motion to amend will be granted as to both parties if the futility argument fails as against Paul Frankel.
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`11
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`Case 2:06-cv-04929-DRD-MF Document 74 Filed 08/26/09 Page 12 of 12 PageID: 4773
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`granted as to both Leonard and Paul Frankel.
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`IV. CONCLUSION
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`For the foregoing reasons, AICO’s motion to file a Second Amended Counterclaim is
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`granted in part, and denied in part. Specifically, AICO cannot assert the New Copyrights as bases
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`for infringement, but it may amend as to Leonard and Paul Frankel.
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` s/ Esther Salas
` Honorable Esther Salas
` United States Magistrate Judge
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`12